UK’s Ofcom warned on investment strategy

A proposal by UK regulator, Ofcom, to force the wholesale network operator, Openreach, into significantly cutting the wholesale price of its 40 Mbps fibre to the cabinet (FTTC) product for internet service providers (ISPs) has “been dealt a blow” after the government warned it would “disincentivise investment” in new “full fibre” (FTTP/H) networks. An editorial in ISPreview notes: “At the time we warned that Ofcom would have to tread very carefully because they run the risk of making FTTC so cheap that it could discourage investment in new/alternative/faster networks, which might struggle to compete against such low pricing. A similar situation already exists in today’s market. Just under half of broadband lines in the UK are still based on slower pure copper ADSL based lines and that’s partly because they’re so cheap and not everybody sees the faster services (e.g. FTTC) as a necessary upgrade.” Now it would seem as if the government’s culture secretary, Karen Bradley, has agreed and she told Ofcom as much in an open letter, in which she says: “It is important that unreasonable profits within the sector are addressed. However, I am concerned that price suppression could reduce demand for better services, such as fibre, and so will disincentivise investment in the network. Transformation of our existing networks to full fibre or other, more future proof, technologies will take many years. So, decisions made now have significant consequences for the future digital infrastructure of the UK and the economy that will depend on it… I would be grateful for your view as to whether Ofcom is striking the right balance between keeping bills low for consumers and incentivising the necessary levels of investment in the UK’s digital infrastructure, for your current consultation and more broadly. I would also welcome your view as to whether Ofcom’s framework is constraining your ability to strike the right balance in any way.” Read more